States won by President Donald Trump in the 2016 election stand to lose the most as a trade war between the U.S. and China kicks off, according to Citigroup research.
“US external trade actions are backfiring, risking a reduction in global trade,” Peterson said. “US tariffs on imported goods are designed to encourage a rebalancing of trade that benefits domestic firms and US exporters. The Trump Administration’s goal of opening closed markets and establishing reciprocal trade abroad has alternatively been met with reciprocal retaliatory tariffs and complaints to the WTO.”
“The dollar value of the US and reciprocal tariffs are nominal, but the tit-for-tat could escalate into a trade war that reduces global, and thereby US trade,” she said.
Trade tensions have also been rising ahead of the U.S. midterm elections in November, when Democrats appear primed to gain seats in the House and possibly a majority.
“Economies exacting retaliatory measures are openly targeting goods produced in ‘red’ states, and sectors the President champions, as well as states represented by key players in Congress, including majority and minority leaders of the House and Senate. Hence, the intensity and duration of the trade disputes may be calibrated by voter sentiment ahead of the midterm elections,” said Peterson.
Correction: Dana Peterson is North America economist at Citigroup. A previous version of this story misstated her title.